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Heavy tumble on Wall St.
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October 15, 1999: 10:13 a.m. ET
Hawkish Greenspan, rising wholesale inflation hit stocks hard
By Staff Writer Malina Poshtova Zang
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NEW YORK (CNNfn) - U.S. stock markets plunged at the open Friday, hit by a combination of a spike in wholesale inflation and a warning from Federal Reserve Chairman Alan Greenspan about a possible severe equity sell-off.
Shortly before 10 a.m. ET, the Dow Jones industrial average tumbled 219.41 points, or 2.2 percent, to 10,067.20.
Market breadth on the New York Stock Exchange was severely negative, with declines smothering advances by 2,045 to 402 on heavy trading volume of 134 million shares.
The Nasdaq composite index fell 92.87 points, or 3.4 percent, to 2,713.97. The S&P 500 index dropped 32.26 points, or 2.2 percent, to 1,251.16.
Wall Street's worst fears -- that rising inflation could bring higher interest rates and that the market could face a severe correction -- both were fueled Friday, after Greenspan late Thursday told banks to stash reserves in case they have to face a big market downturn.
The damage was compounded early Friday morning, when the Producer Price Index, the main indicator of inflation on the wholesale level, posted its largest increase in nine years in September.
The PPI gained 1.1 percent overall last month, while its core component, which excludes food and energy prices, rose 0.8 percent. In August, the PPI rose 0.5 percent.
Prices in the bond market initially fell -- and yields rose -- after the surprise spike in producer prices led investors to speculate that inflation pressure may be picking up faster than previously suspected. Greenspan's stern warning contributed to pressure on bond prices.
But the stock market's sharp sell-off led some market participants to seek a save haven in government debt, leaving the bellwether 30-year Treasury bond up 1/2 of a point in price, its yield at 6.28 percent, down from Thursday's 6.32 percent -- which was the highest the bond's yield has been in almost two years.
The bearish combination of rising producer inflation and a hawkish comment from Greenspan also weighed on the dollar, leaving the currency sharply lower against both the yen and the euro.
Rate sensitive stocks take a hit
Wall Street's two most interest rate-sensitive sectors -- banking and technology -- were among the first and the hardest hit in the broad sell-off that struck the market.
Banks' lending business would slow down and a potential increase in debt defaults could hurt profitability if interest rates rose. At the same time, high-tech companies would have to curb their usually heavy borrowing, which they rely on to support their fast growth rates.
Among the leading financial stocks, American Express (AXP) shed 5-15/16 to 136-1/16, Citigroup (C) fell 1-1/4 to 42-11/16 and J.P. Morgan (JPM) dropped 3-1/16 to 107-13/16. All three are Dow components.
Among the high-tech blue chips, Dow member IBM (IBM) lost 2-11/16 to 104-5/16 and Hewlett Packard (HWP), also one of the 30 industrials, fell 1-13/16 to 80-3/16.
On the Nasdaq, Microsoft (MSFT) was down 2-13/16 to 87-7/8, Intel (INTC) fell 1-31/32 to 71-3/8, Dell (DELL) lost 1-17/32 to 42-13/16 and Cisco Systems (CSCO) retreated 1-15/16 to 67-7/16.
Earnings also in focus
Investors also punished stocks of companies that reported their latest earnings -- even when those results were better than expected.
Among those punished, Internet advertiser DoubleClick (DCLK) tumbled 15-1/8, or nearly 12 percent, to 112-3/8, after the company reported a third-quarter loss that was slightly smaller than expected.
Better-than-expected fiscal first-quarter earnings at Sun Microsystems (SUNW) failed to rescue the company's stock, which fell 15/32 to 89-7/8.
And shares of Dow component Caterpillar (CAT) dropped 1-5/8 to 54 after the construction equipment maker reported stronger-than-forecast third-quarter profit, but said revenue for the full year would fall short of expectations. 
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